Impact of climate change

A few key results

Science-based target

Set to reduce our greenhouse gas emissions by 21% from 2015 levels by 2025.

$55bn environmental financing target

Financing activities planned to help address climate change and support the transition to a low carbon economy increased to $55bn by 2025.

Why is this important?

NAB recognises that climate change is a significant risk and a major challenge for the global economy and society. We support the transition to a low carbon economy, consistent with the global agreement reached in Paris to limit global warming to less than 2 degrees above pre-industrial levels (the Paris Agreement).

The impacts of climate change and climate-related policy are having a growing effect on our business, our customers, and the communities in which we operate.

We believe we have a key role to play in providing finance to assist the low carbon transition. That’s why we continue to be the leading arranger (by market share) of project finance for renewable energy in Australia¹.

A long-standing objective of our climate change strategy has been to learn by doing and then incorporate this knowledge into how we manage environment, social and governance (ESG) risks and provide products and services to assist our customers.

Our climate change strategy was refreshed in FY2017. It focuses on the following four areas:

Leadership commitments
Developing climate change knowledge and insights
Supporting our customers through the low-carbon transition
Investing in organisational capability to identify and respond to climate change risks and opportunities.

For more details about our climate change strategy and governance refer to our Sustainability Report (PDF, 3.3 MB).

Download our Environmental Agenda. (PDF, 301 KB)

Important Information

1. Thomson Reuters: Project Finance International 2006-2018 Asia Pacific Initial Mandated Lead Arrangers League Tables – 2018 AUD$ Project Allocation, NAB analysis ranking against four major Australian banks – cumulative volume as at 30 June 2018.

We’ve set a science-based target to reduce greenhouse gas emissions

We have set a science-based target to reduce greenhouse gas (GHG) emissions from our operations by 21% from 2015 levels by 2025. The target, set in early 2016, supports our commitment to the internationally agreed goal to limit global warming to less than 2 degrees Celsius above pre-industrial levels. A science-based emissions reduction target is one that is consistent with what scientists say is necessary to keep global warming below the threshold of two degrees Celsius.

Our target covers:

all direct GHG emissions (Scope 1)
indirect GHG emissions from consumption of purchased electricity, heat or steam (Scope 2) across all GHGs required in the GHG Protocol Corporate Standard – with the exception of data centre emissions.

We have adopted the Sectoral Decarbonisation Approach’s ‘Service Buildings’ methodology¹ as the most appropriate given the nature of our business operations. Our Scope 1 and 2 targets have been submitted to the Science-Based Target Initiative for informal review, and they have confirmed that the target is considered science-based.

We have not set a target for Scope 3 (value chain) emissions, as there is currently no standard framework or agreed methodology for science-based targets for finance-related activities. We have participated in the United Nations Environment Program Finance Initiative/World Resources Institute/2^o Portfolio Carbon Initiative, which investigated the development of standardised approaches to disclosure on carbon-related risk exposure and performance for financial institutions. We welcome the opportunity to continue to participate in future developments in this area.

Data centre emissions, which accounted for around 27% of our 2015 base year emissions, have been excluded from our target as the ‘Service Buildings’ methodology is not appropriate for data centres. Instead, we have offered to pilot a science-based target for data centres if, and when, a draft method becomes available. We have also set a target to have our data centres operate with a Power Usage Effectiveness of less than or equal to 1.5 by 2020.

We report on our progress against our science-based target in our regular annual carbon reporting.

Important information:

1. The Sectoral Decarbonisation Approach (SDA) is a methodology that allows companies to set emission reduction targets in line with a 2°C decarbonisation scenario. It is based on the 2°C scenario (2DS) developed by the International Energy Agency (IEA) as part of its publication, Energy Technology Perspectives.

We’ve made a number of commitments to help address climate change and support the transition to a low carbon economy

We recognise that climate change is a significant risk and complex challenge requiring action at all levels – local, state, national and international - and by all stakeholders.

We believe an effective United Nations agreement will:

provide both context and a framework for national actions and policies
facilitate international cooperation
address the challenge of climate change.

It will also support the globally agreed goal to limit global warming to less than 2°C above pre-industrial levels, as well as giving regard to science-based reduction targets and the policy and market mechanisms necessary to assist in achieving greenhouse gas (GHG) reductions.

An effective international agreement should assist in providing business with the certainty and frameworks it needs to scale up global investment in low carbon technologies and infrastructure and lead to the creation of significant new business opportunities.

We believe the financial sector has an important role to play in assisting the transition to a low carbon economy, through both the energy we purchase directly and through financing. This transition however, needs to take place in a considered and balanced manner, supported by a stable policy environment that can underpin the transition and provide investment certainty over time.

Our commitments

In recognition of the role we can play in supporting the transition to a low carbon economy that limits global warming to less than 2°C, NAB has adopted three “We Mean Business” Coalition climate change commitments¹. In addition, we have made three further commitments that demonstrate our intention to continue to take a leadership role through how we source energy for our operations and support our customers through financing activities.

1. Undertake financing activities of AUD $55 billion over the ten years to September 2025 to help address climate change and support the transition to a low carbon economy

This commitment was increased in 2017 from $18 billion by 2022 to $55 billion by 2025 and includes:

$20 billion to support green infrastructure, capital markets and asset finance
$35 billion in new mortgage lending flow for 6 Star residential housing in Australia.

We’re the leading arranger (by market share)² of project finance for renewable energy in Australia, having arranged more than $7.7bn in project finance since 2003. We have increased and broadened our activity, including a number of industry-leading initiatives such as:

Launching the first Australian bank green bond and the first bank-issued Climate Bond Standards certified bond globally to finance A$300m of renewable energy assets. We have since been recognised as a 'Green Bond Pioneer' by the Climate Bonds Initiative and London Stock Exchange for our work in developing the Australian green bond market.
Arranging Australia’s first sustainability bond, Australia’s first green securitisation bond, Australia’s first semi-government green bond, Australia’s first US Private Placement (USPP) green bond and first green bond issued in New Zealand.
Providing discounted finance for energy efficient equipment and small scale renewable energy with the support of the Clean Energy Finance Corporation.

Accordingly, this commitment of AUD $55 billion in financing activities builds on our leadership position and continues to support the transition to a low carbon economy. This new financing activity includes:

lending for Green Star certified commercial buildings
specialised and corporate finance for projects that reduce emissions assist with climate change adaptation and lending to other low carbon businesses
green bonds
asset finance
advisory activities, underwriting and arranging.

Finance will be provided to our customers to assist them in undertaking climate change mitigation activities such as renewable energy installation and energy efficiency initiatives, including low-carbon property, low emission transport, in addition to climate change adaptation activities.

2. Source 50% of our Australian electricity requirements from renewable energy sources by 2025

This commitment was increased in 2017 from 10% by 2018 to 50% by 2025.

Minimising the environmental impact of our business is a key focus of ours. In 2010, we became the first Australian bank to achieve National Carbon Offset Standard certified carbon neutrality and we maintain this through an on-going focus on energy efficiency and other carbon reduction initiatives. We’ve achieved this by:

reducing the amount of energy we used by our equipment, lighting, heating and cooling
installing solar panels on branches
switching from brown coal-fired grid electricity to tri-generation and co-generation at two key sites
purchasing offsets to neutralise remaining emissions.

Sourcing 50% of the electricity we need from renewable energy sources will continue to reduce our carbon emissions and help scale-up Australian-based low-emissions infrastructure and renewable energy generation.

3. Engage responsibly on climate policy

We will continue to engage in dialogue with key stakeholders, including customers and the wider community, to help inform how we advocate on climate policy with all levels of government. We will also ensure that our engagement on climate policy is co-ordinated and consistent and we will communicate our position, actions and outcomes annually through our CDP climate change survey response and annual report suite of documents.

4. Report climate change information through mainstream reporting channels

Consistent with our commitment to transparency and integrated reporting, we are committed to identifying, developing and implementing ways to improve disclosure on carbon risk exposure through collaboration with other financial institutions, both in Australia and internationally. We have publicly reported on our GHG emissions since 2003. We are aligning our GHG reporting with internationally recognised climate change reporting frameworks, such as the Climate Disclosure Standards Board’s Climate Change Reporting Framework and the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD). We continue to incorporate disclosure of relevant climate change related information in NAB’s Annual Financial Report and have included carbon-related disclosures in our Half and Full Year Investor Presentations since May 2015.

5. Commit to putting a price on carbon and align to the UN Global Compact’s business leadership criteria on carbon pricing

We first established an internal carbon price in 2010, as part of our commitment to achieve and maintain carbon neutrality. This has helped to drive investment in energy efficiency initiatives and helps us to achieve GHG reduction targets. We will continue to maintain the use of an internal carbon price and publicly communicate our understanding of how market mechanisms can help achieve GHG reductions. NAB will also continue to disclose, in our annual CDP climate change survey response and other relevant corporate publications, how we use our internal carbon price.

6. Play an active role in addressing climate change through seeking to innovate across key sectors and markets and supporting low carbon opportunities for our customers.

Important information:

1. Commitments 3, 4 and 5 adopt three of the CDP (formerly the Carbon Disclosure Project)-led “We Mean Business” Coalition global climate change commitments.

2. Thomson Reuters: Project Finance International 2006-2018 Asia Pacific Initial Mandated Lead Arrangers League Tables – 2018 AUD$ Project Allocation, NAB analysis ranking against four major Australian banks – cumulative volume as at 30 June 2018.

We’re Australia’s first carbon neutral bank

In 2010, we became the first Australian owned bank to achieve carbon neutrality under the National Carbon Offset Standard (NCOS) Carbon Neutral Program. We achieved this through a concentrated focus on energy efficiency, the use of cleaner energy sources, and the purchasing and retirement of offsets to neutralise remaining emissions.

We define carbon neutrality as a process involving five steps:

Defining and measuring our carbon (greenhouse gas) inventory.
Reducing our greenhouse gas emissions through energy efficiency, demand management (employee behavioural change) and transitioning to lower emissions energy sources, where it’s practicable.
Avoiding emissions through the purchase of renewable energy (where we choose to use renewable energy to support our strategy of investing in local emissions abatement).
Offsetting remaining emissions through the purchase of quality carbon offsets.
Verifying and reporting on our progress by:

regularly assessing our carbon neutrality and reduction targets
obtaining annual external verification and assurance of our carbon accounts (inventory and offsets) and carbon neutral commitment
reporting regularly to key internal stakeholders and annually to external stakeholders in our Sustainability Report.

We lead by example

Maintaining our carbon neutral status is an important part of our strategy to reduce our climate change impact. It also illustrates our commitment to 'lead by example' in the delivery of our Environmental Agenda.

We've been operating on a carbon neutral basis (meaning our net emissions of greenhouse gas from our global operations – as defined in our carbon inventory - have been zero) since 1 July 2010. FY2019 is our 9th year of maintaining carbon neutrality.

How we calculate our carbon emissions

Our carbon inventory includes greenhouse gas emission sources from operations in Australia, Asia, New Zealand, the United Kingdom and the United States. We currently exclude an immaterial source of emissions from a small subsidiary in Canada.

Work on our carbon inventory is ongoing. For some emissions sources, it’s difficult to get access to the activity data needed for accurate greenhouse gas calculations. However, we can provide a picture of the items in our inventory that have been calculated for each of our businesses.

Download our emissions sources report (PDF, 37KB).

Scope 1 and 2 emissions

The boundaries for Scope 1 and 2 emissions have been determined using an operational control approach. More specifically, in Australia and the UK, the boundary requirements for most Scope 1 and 2 emissions are covered by the regulatory requirements of the National Greenhouse and Energy Reporting Act 2007 (Cth) (Australia) and the Carbon Reduction Commitment Energy Efficiency Scheme (UK).

Using these regulatory reporting requirements to define our Scope 1 and 2 emissions and boundaries for reporting helps support us to meet our compliance obligations and ensures we are aligned with our regulatory reporting requirements.

Download details about our methodology and emissions factors (PDF, 146KB).

Scope 3 emissions

For Scope 3 emissions, we’ve used an operational control approach and developed principles and criteria - outlined in our Group Environmental Reporting and Offset Management Policy (PDF, 158KB) – to define the emissions sources included in our carbon inventory.

A summary of the key methodologies, assumptions and emissions factors applicable to each emission source reported by our businesses are provided below.

Reporting Library

Asia Carbon Inventory 2018 (PDF, 108KB)
Australia Carbon Inventory 2018 (PDF, 119KB)
New Zealand Carbon Inventory 2018 (PDF, 72KB)
United Kingdom Carbon Inventory 2018 (PDF, 55KB)
United States Carbon Inventory 2018 (PDF, 40KB)
NAB Group Carbon Inventory 2018 (PDF, 34KB)

Our approach to offsetting

Our Group Environment Reporting and Offset Management Policy helps us make sure that we purchase offsets that are real, quantifiable, additional and permanent. Each year, we also ensure sufficient offsets are retired to neutralise our carbon emissions.

The total portfolio of offsets purchased and retired to date includes offsets issued under the Australian Emissions Reduction Fund, the Gold Standard, the Verified Carbon Standard, the New Zealand Emissions Trading Scheme and the Clean Development Mechanism.

Our purchased offsets have come from over 40 separate projects to date including:

savanna burning projects in Australia;
forestry projects in Australia, New Zealand and Papua New Guinea;
solar projects in China and Taiwan;
wind farm projects in China and India;
a rice husk power plant in Thailand;
fuel switch projects in Brazil, Thailand, China and India - generating industrial heat from renewable biomass instead of fossil fuel;
a Thai biogas utilisation project that replaces oil usage with methane from waste water;
run of river hydro power projects in China, New Zealand and India; and
upgrades to geothermal plants in Turkey and Indonesia.

When purchasing our offsets, we look for opportunities that deliver not only accredited and verified emissions reductions, but also provide health, education and additional social and environmental benefits and infrastructure for local communities in the areas in which the offset projects are delivered.

Forward purchasing offset model

We use a forward purchasing model to meet our carbon neutral commitment. This type of model calculates forecast carbon emissions for the forthcoming year using the actual carbon emissions reported in the prior year's audited carbon inventory.